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Case Study: Internal and External

Environmental Audit of Automobile


Industry in the UK

Navashree Ghosh
6-11-2014
Internal and External environmental audit of automobile industry in the UK Navashree Ghosh

Table of Contents
Introduction ................................................................................................................................................... 3
External Environmental Analysis ................................................................................................................. 4
PEST Analysis .......................................................................................................................................... 4
Political Influences................................................................................................................................ 4
Economic Influences ............................................................................................................................. 4
Social-cultural Influences ..................................................................................................................... 4
Technological issues ............................................................................................................................. 4
Internal Analysis ....................................................................................................................................... 4
Generic Competitive Strategies .................................................................................................................... 5
SWOT Analysis ........................................................................................................................................ 5
Porter's 5 Forces ............................................................................................................................................ 5
Conclusion .................................................................................................................................................... 6
Bibliography ................................................................................................................................................. 7

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Internal and External environmental audit of automobile industry in the UK Navashree Ghosh

The aim of this report is to represent the results of internal and external environmental audit of
the automobile industry in the United Kingdom. The external environmental analysis will be done using
PEST and Porters Five Forces analysis whereas the internal audit will be done by focusing on the
different automobile brands, technologies, markets, people related to this industry etc. SWOT analysis
will be done for analyzing generic competitive strategies in this industry.

Introduction
The automobile industry in the UK is one of the most promising billion dollar industry in the
country. The industry is well known for world famous sports car manufacturing companies such as
Bentley, Jaguar, Rolls-Royce, Land Rover, Aston Martin and many more. There are other types of car
manufacturers such as Toyota, Honda etc.
The following table shows the number of cars and commercial vehicles manufacturers in the UK. (Office
for National Statistics (ONS), 2013)

Year Number of cars Number of Commercial Total number of vehicles


Vehicles
1990 1,296 270 1,566
1991 1,237 217 1,454
1992 1,292 248 1,540
1993 1,376 193 1,569
1994 1,467 228 1,695
1995 1,532 233 1,765
1996 1,686 238 1,924
1997 1,698 238 1,936
1998 1,748 227 1,976
1999 1,787 186 1,973
2000 1,641 172 1,814
2001 1,492 193 1,685
2002 1,630 191 1,821
2003 1,658 189 1,846
2004 1,647 209 1,856
2005 1,596 207 1,802
2006 1,442 208 1,650
2007 1,535 216 1,750
2008 1,447 203 1,650
2009 999 91 1,090
2010 1,270 123 1,393
2011 1,344 121 1,465
2012 1,465 112 1,577
2013 1,510 88 1,597

The market forecast from The Financial Times says that the vehicle production in the UK will
reach to a historic peak by 2017. (The Society of Motor Manufacturers and Traders, 2014) Their
prediction says,

Year Number of production units

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Internal and External environmental audit of automobile industry in the UK Navashree Ghosh

2014 1,724,000
2015 1,864,000
2016 1,993,000
2017 2,062,000

External Environmental Analysis


PEST Analysis
PEST analysis is done based on the four groups of influences behind the automobile industry in the UK.
The groups are Political, Environmental, Socio-culture and Technological group of influences.
Automobile industry includes processes such as manufacturing, supply chains, retails and sales, servicing
etc. The possible factors are decided by considering all these processes.

Political Influences
Political influences include competition policies, laws and legislation related to environmental issues,
policies and legislations related to automobile Industry, taxations etc. The competition policies have
created sheer competition in the industry and affect the marketing strategies of different automobile
companies in the UK. One such example is EU completion policy against monopoly in the industry.
Environmental issues are handled by laws and regulations from European Environmental Liability
Directive. The emissions from gasoline and diesel based vehicles cause severe damages to the
environment. Euro 4 emission standard controls emission limits set for different vehicles and different
areas. Also, there are encouragement and support from governments to manufacture eco-friendly cars. In
London, consumers pay fuel tax to the government. It is higher in the UK than many other countries.

Economic Influences
Economic influences are related to growth and inflations, trade, labor force, income distribution, wealth
etc. Economic growth creates a possibility for more sales. Also, it rises opportunities in business as well
as in related job sectors.

Social-cultural Influences
Socio-cultural influences include different demographics of population, households, transportation,
environmental issues etc. Other than that it also includes social factors such as public health, road safety,
car parking etc.

Technological issues
Technological issues are related research, innovations related to automobile industry such as energy
saving engines, new fuels, biofuels etc. Tools supporting CAD for car designing etc.

Internal Analysis
Internal analyses are based on the factors such as
i. Resource Audit
a. Brand
b. Market and products
c. Finance
d. Technology

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Internal and External environmental audit of automobile industry in the UK Navashree Ghosh

e. People
ii. Value chain analyses
Resource audit can provide information about strategic capabilities, availability of resources etc. Brand
acquisitions help in the promotion of business and acquiring the existing market share of the band. Value
chain analyses are worldwide accepted process for analyzing relationships among the available resources
and business strategies.

Generic Competitive Strategies


SWOT Analysis
The SWOT analysis is done by considering the associated strengths and weaknesses of the industry.
Possible opportunities and threats are also discussed. The SWOT matrix is given below,

Strengths Weaknesses
High cost in transactions.
One of the largest industries in the country. The structural inertia of the industry.
Diversity in manufactured products. Such as
sports cars, public transports, volume car, trucks,
taxis etc.
Supports from governments for various
projects,
Big companies such as Ford etc. supports
research and innovations.
Power suppliers are high bargaining.
Enough capital investments.
Opportunities Threats
Demand in the global automobile market. Global recession
Scopes in inventing energy saving eco-friendly Global overcapacity in the industry.
cars. Barriers to market entry.
Scope in passenger car manufacturing industry. Sheer competition.
Fluctuating price of raw materials
The industry is highly regulated.
The products are easily imitable.
Power buyers are low bargaining.
Strict laws and legislations, emission controls
etc.

Porter's 5 Forces
P5F or Porter's Five Forces is a tool for analyzing the opportunities in an industry by considering its
attractiveness in the global marketplace. The five forces are likely to play significant roles in the
automobile industry in the UK. The profitability of the industry is likely to be determined by this analysis.
For the UK automobile industry, the forces are,
1. The barriers for new entrants
This is a relatively low threat to the automobile industry in the UK.
2. The bargaining power of buyers

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Internal and External environmental audit of automobile industry in the UK Navashree Ghosh

Bargaining power of buyers is lower than many other countries for the same industry.
3. The bargaining power of suppliers
The bargaining power of supplies of raw material, auto parts etc. are higher in the UK.
4. Availability of substitute products
There are several companies in the market. The products are all similar. Customers have lots of
options.
5. Intense competition and rivalry
This industry is highly competitive in nature in the UK or possibly in all countries of the world.

Conclusion
This report contains an external and internal audit of the automobile industry in the UK. The analyses
have been done using methods such as PEST analysis, SWOT analysis, P5F etc. global recession and
status of an economy have affected the market, however, it is still one of the biggest industry in the UK.

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Internal and External environmental audit of automobile industry in the UK Navashree Ghosh

Bibliography
[1] Council, T. A. (2010). The Automotive Council UK. Retrieved from The Automotive Council:
http://www.automotivecouncil.co.uk/
[2] Office for National Statistics (ONS). (2013). Office for National Statistics (ONS). Retrieved from
Office for National Statistics (ONS): http://www.ons.gov.uk/ons/index.html
[3] SMMT. (2014). UK automotive sector. Retrieved from SMMT: http://www.smmt.co.uk/industry-
topics/uk-automotive-sector/
[4] The Society of Motor Manufacturers and Traders. (2014, January 23). UK car manufacturing hits six-
year high. Retrieved from The Society of Motor Manufacturers and Traders (SMMT):
http://www.smmt.co.uk/2014/01/uk-car-manufacturing-hits-six-year-high/